Legislature(2017 - 2018)BARNES 124
03/06/2018 11:30 AM House ARCTIC POLICY, ECONOMIC DEV., & TOURISM
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| Audio | Topic |
|---|---|
| Start | |
| HB383 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HJR 33 | TELECONFERENCED | |
| += | HB 383 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ARCTIC POLICY,
ECONOMIC DEVELOPMENT, AND TOURISM
March 6, 2018
11:31 a.m.
MEMBERS PRESENT
Representative John Lincoln, Chair
Representative Bryce Edgmon
Representative Andy Josephson
Representative Chris Tuck
Representative Mark Neuman
MEMBERS ABSENT
Representative Gary Knopp
Representative David Talerico
COMMITTEE CALENDAR
HOUSE BILL NO. 383
"An Act establishing the Travel Alaska Board; relating to a
tourism marketing assessment; and establishing a tourism
marketing fund."
- HEARD & HELD
HOUSE JOINT RESOLUTION NO. 33
Urging the Alaska delegation in Congress to pursue the
establishment of an Arctic naval station; supporting the
increase in defensive capabilities in the Arctic region; and
encouraging the development of critical Arctic infrastructure.
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 383
SHORT TITLE: TOURISM MARKETING:BOARD;ASSESSMENT;FUND
SPONSOR(s): REPRESENTATIVE(s) GRENN
02/21/18 (H) READ THE FIRST TIME - REFERRALS
02/21/18 (H) AET, FIN
02/27/18 (H) AET AT 11:30 AM BARNES 124
02/27/18 (H) Heard & Held
02/27/18 (H) MINUTE(AET)
03/06/18 (H) AET AT 11:30 AM BARNES 124
WITNESS REGISTER
BROOK IVY, Staff
Representative Jason Grenn
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of Representative Jason Grenn,
sponsor of HB 383, answered questions.
JILL MCLEOD, Attorney
Anchorage, Alaska
POSITION STATEMENT: Representing Alyeska Resort Management
Company, testified in opposition during the hearing of HB 383.
STEPHEN MAHAY, Spokesperson
Mahay's Jet Boat Adventures
Talkeetna, Alaska
POSITION STATEMENT: Testified in support during the hearing of
HB 383.
BRETT CARLSON
Coldfoot, Alaska
POSITION STATEMENT: Testified during the hearing of HB 383.
KIRK HOESSLE, President
Alaska Wildland Adventures
Girdwood, Alaska
POSITION STATEMENT: Testified in support during the hearing of
HB 383.
DAVID STORY, Employee
Alaska Wildland Adventures
Cooper Landing, Alaska
POSITION STATEMENT: Testified in support during the hearing of
HB 383.
KELLY BENDER, Co-owner
Lazy Otter Charters
Whittier, Alaska
POSITION STATEMENT: Testified in support during the hearing of
HB 383.
KAREN HARRIS, Owner
Alaska Garden Gate B&B and Cottages
Palmer, Alaska
POSITION STATEMENT: Testified in support during the hearing of
HB 383.
DEBORAH HANSON, Spokesperson
Pike's Waterfront Lodge
Fairbanks, Alaska
POSITION STATEMENT: Testified in support during the hearing of
HB 383.
JOHN LAMBETH, Industry Consultant
Alaska Travel Industry Association
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing of HB 383.
MARK WEAKLAND, General Manager
Hotel Alyeska;
Spokesperson, Alyeska Resort
Girdwood, Alaska
POSITION STATEMENT: Testified in opposition during the hearing
of HB 383.
DONALD BULLOCK
Juneau, Alaska
POSITION STATEMENT: Testified in opposition during the hearing
of HB 383.
ACTION NARRATIVE
11:315 AM
CHAIR JOHN LINCOLN called the House Special Committee on Arctic
Policy, Economic Development, and Tourism meeting to order at
11:31 a.m. Representatives Josephson, Tuck, Edgmon, and Lincoln
were present at the call to order. Representative Neuman
arrived as the meeting was in progress.
HB 383-TOURISM MARKETING:BOARD;ASSESSMENT;FUND
11:33:05 AM
CHAIR LINCOLN announced that the first order of business would
be HOUSE BILL No. 383, "An Act establishing the Travel Alaska
Board; relating to a tourism marketing assessment; and
establishing a tourism marketing fund."
11:33:59 AM
BROOK IVY, Staff, Representative Jason Grenn, Alaska State
Legislature, speaking on behalf of Representative Grenn, sponsor
of HB 383, said she would address questions on the bill that
were raised during the previous hearing [on 2/27/18]. In
response to Representative Neuman's inquiry as to where vehicle
rental tax (VRT), [collected by the Tax Division, Department of
Revenue] funds are expended, Ms. Ivy said the Department of
Transportation & Public Facilities (DOTPF) reported - in fiscal
year 2018 (FY 18) - the department received approximately
$5,497,300 in VRT receipts, which were used for direct highway
and airport runway maintenance activities, including labor,
equipment, and materials. She directed attention to fiscal note
[Identifier: HB383-DNR-PKS-02-27-18], provided in the committee
packet, which indicated the Division of Parks and Outdoor
Recreation, Department of Natural Resources (DNR) received
[$300,021,000] in FY 18 which was used for personal services or
personnel. To the question of whether VRT funds were used to
bond parking garages, she related that the Legislative Finance
Division, Legislative Agencies and Offices, advised not to its
knowledge, and clarified that debt service for the Linny Pacillo
Parking Garage in Anchorage came from unrestricted general funds
(UGF).
11:36:18 AM
MS. IVY, in response to a question raised by Chair Lincoln as to
whether Alaska residents could be exempted from the assessment,
stated that Legislative Legal Services, Legislative Affairs
Agency, advised exempting Alaska residents is prevented by the
privileges and immunities clause within the Fourteenth Amendment
to the U.S. Constitution, which prevents states and local
governments from discriminating against citizens of other
states. In order to overcome the aforementioned provision, the
bill must not burden a fundamental privilege protected by the
clause, or if so, there must be a substantial reason for
discriminating against non-residents, and she concluded an
Alaska-preference option would violate the Constitution. Ms.
Ivy continued by pointing out VRT revenue is collected mostly
from visitor activities, which in other states is used to
support statewide tourism marketing programs. In fact, the
statute in Alaska related to VRT directs that receipts are to be
used for tourism development and marketing; therefore, the
legislature has the purview to appropriate VRT revenue to its
original purpose. Reinvestment of VRT into tourism marketing is
important to ensure the new plan for statewide destination
marketing is successful. She noted the tourism industry
contributes over $100 million in various taxes and fees to the
state's general fund (GF), thus an appropriation of $9 million
to $10 million in VRT to tourism marketing funds represents a 10
percent reinvestment to maintain Alaska's healthy visitor
industry. Turning to the question of why the tourism industry
can't achieve the goal of HB 383 "on their own," she said HB 383
would only involve state government as an official collecting
agent of any potential assessment based on a tourism improvement
district (TID) model. The TID structure is a voluntary
assessment that intends to level the playing field, create
transparency and reliability, and allow for businesses'
confidentiality.
11:40:19 AM
MS. IVY pointed out that in a manner like the Alaska Seafood
Marketing Institute (ASMI) legislation, HB 383 provides for an
assessment, government oversight through a governor-appointed
[board of directors], and regulations issued by the Department
of Revenue (DOR). Further, HB 383 is not a tax bill, and the
industry is lobbying to manage the tax process. She returned
attention to additional information provided in the committee
packet which indicated the tourism industry has felt the impacts
of decreases in funding for Alaska's tourism marketing program.
In fact, although the cruise [ship] industry continues to grow,
growth in that industry does not benefit most tour operators in
the state; however, statewide destination funding benefits
smaller businesses. Ms. Ivy concluded that tourism is part of
an [economic] solution, and she reviewed tourism's net positive
return on investment (ROI) figures. She reminded the committee
that HB 383 was proposed in response to FY 17 operating budget
legislative intent language that tasked the tourism industry
with developing a sustainable plan for funding. She inquired as
to where a source of funding for a marketing plan would be found
if not by collecting from visitors. Ms. Ivy acknowledged the
bill is complicated legislation with issues to address such as
the structure of the transition board and other issues that may
be addressed by forthcoming amendments.
11:44:45 AM
REPRESENTATIVE NEUMAN pointed out that the legislature seeks a
sustainable plan to fund state support for the tourism industry.
Upon speaking with members of the tourism industry, he expressed
his belief HB 383 would not pass as written because it diverts
general funds currently needed by the Division of State Parks
and Outdoor Recreation, DNR, and the Alaska Marine Highway
System, DOTPF. Representative Neuman suggested modeling a
funding mechanism after the North American Model of Wildlife
Conservation, which established a nationwide 10 percent excise
tax on sporting goods that is distributed to states for wildlife
management. With a target goal of $10 million per year, a tax
could be based on the estimated number of visitors each year;
however, he cautioned that an excise tax may be perceived as a
duplication of taxes on cruise ship visitors. The North
American Model of Wildlife Conservation has proven to be
successful in managing wildlife for 79 years and assesses only
those who use related management services. He restated he would
not support legislation that would take money away from other
agencies for a program that is not mandated by the Alaska State
Constitution.
11:49:30 AM
REPRESENTATIVE JOSEPHSON asked Ms. Ivy to cite the statute
directing that [VRT] revenue is to be appropriated for tourism
and marketing.
MS. IVY said AS 43.52.080(c) reads:
(c) The legislature may appropriate the actual balance
of the vehicle rental tax account for tourism
development and marketing. This section is not
intended to create a dedicated fund.
REPRESENTATIVE JOSEPHSON questioned whether [VRT] funds have
been rerouted to other agencies for tourism-related functions.
MS. IVY said correct. She explained that the sponsor of the
bill reviewed an overview of the governor's FY 19 budget from
the Legislative Finance Division, Legislative Agencies and
Offices, and found VRT tax receipts were identified as "non-
designated use of designated funds"; however, the tourism
marketing industry has not previously brought said issue
forward. Ms. Ivy directed attention to a document provided in
the committee packet entitled, "State Distribution of Vehicle
Rental Tax Funds 1200 VehRntlTax (DGF)," which showed VRT funds
were appropriated at less than the full amount from FY 06
through FY 11, and no VRT funds were appropriated to the Tourism
Marketing Program from FY 12 through FY 17.
REPRESENTATIVE JOSEPHSON observed, relative to intent language,
both positions [expressed by Ms. Ivy and Representative Neuman]
are correct because VRT funds are not unrestricted general funds
(UGF); on the other hand, [appropriating all VRT funds to the
Tourism Marketing Program] would create funding shortfalls for
other departments.
MS. IVY acknowledged that the sponsor recognizes there would
have to be a fund source change to UGF for DNR and DOTPF.
Ultimately, even those from industry who oppose the legislation
agree VRT receipts are a pass-through cost to visitors and
similar to assessments in other sectors; therefore, a key piece
of the legislation provides that VRT revenue would go to tourism
marketing as originally intended.
11:54:00 AM
REPRESENTATIVE NEUMAN surmised the bill sponsor and industry
feel VRT [should be directed to the tourism marketing program];
however, he opined the legislature feels differently because the
program has not been [fully] funded through VRT. Further, the
legislature has worked with industry for many years and
legislators have urged industry to raise funds autonomously -
independent from the state. He stressed that since FY 07, VRT
revenue has been appropriated by the legislature to support
infrastructure that is used by the tourism industry.
REPRESENTATIVE TUCK returned attention to the aforementioned
document and noted that all funds are general funds. In
addition, [AS 43.52.080(c)] advises that the legislature may
appropriate VRT for tourism marketing. For several years the
legislature did fund tourism marketing; during that period of
time - from FY 06 through FY 11 - VRT funds were not
appropriated to [the Division of Highway/Aviation & Facilities],
DOTPF, but they resumed again in FY 12.
11:56:07 AM
CHAIR LINCOLN opened public testimony on HB 383.
11:56:50 AM
JILL MCLEOD, Attorney, informed the committee she provided
Alyeska Resort Management Company with a legal analysis of the
impact HB 383 would have on its business. She stated Alyeska
Resort Management Company opposes HB 383 for a variety of
reasons, particularly because the tax cannot be dedicated to
statewide tourism marketing. Further, the bill lacks
performance metrics - a mechanism to track the success of
marketing efforts - and is unclear as to which tourism
businesses would be assessed. From the business perspective of
Alyeska Resort Management Company, the tax would
disproportionately affect its Alaska resident users. Ms. McLeod
said the tax currently is not needed and returned to the issue
of funds that cannot be dedicated to statewide tourism
marketing; VRT, which is dedicated to tourism and marketing, has
historically not been fully used for tourism and marketing. She
opined that creating a new assessment for the same purpose is no
guarantee of the use of funds, and she urged the committee to
review the written comments submitted by Alyeska Resort
Management Company.
12:00:11 PM
REPRESENTATIVE TUCK asked for clarification that funds remain
unused.
MS. MCLEOD explained that only a very small portion of VRT
revenue was appropriated to tourism marketing. For example, in
2017, approximately $1.5 million, out of an estimated $12
million collected, was appropriated towards tourism.
REPRESENTATIVE JOSEPHSON questioned whether Alyeska Resort
Management Company would benefit by moving the funds created
under HB 383, subsection (c), so that, albeit with discretion,
there could be an appropriation [to tourism and marketing] of
$12 million from VRT, rather than $1.5 million.
MS. MCLEOD agreed if the full amount of revenue generated from
VRT was appropriated to tourism marketing, under the purview of
the Alaska Travel Industry Association board (ATIA), there would
be no need to propose a further assessment on industry.
However, performance metrics would still be necessary to gauge
the efficacy of marketing efforts.
REPRESENTATIVE JOSEPHSON understood that the tourism industry
seeks to self-impose a tax in order to demonstrate its good
faith to the legislature.
MS. MCLEOD restated the need for performance metrics "attached
to the spending in order to ensure that the tourism marketing
actually is effective."
12:04:34 PM
CHAIR LINCOLN surmised if HB 383 were to pass and industry self-
imposed a tax, but the legislature failed to appropriate the
funds to marketing, industry could "roll that assessment back."
MS. MCLEOD said yes, there is a provision to terminate any
assessment through an election process; further, there are other
issues related to who holds the authority to propose the initial
assessment, the transition board, and the nominees to the ATIA
board. In fact, HB 383 directs the election to be held in
accordance with AS 44.25.270 and AS 44.25.275, which are related
to tourism businesses; however, tourism businesses, tourism
segments, and tourism industry are all undefined in the bill.
She advised that the legislation is "premature" as other
jurisdictions have spent years developing tourism improvement
districts.
12:08:38 PM
STEPHEN MAHAY, Spokesperson, Mahay's Jet Boat Adventures,
expressed his support for HB 383. He said he has been in the
[tourism] industry for 42 years and recalls that state marketing
funding for the industry has varied greatly over the years. In
fact, in some years marketing has been on a national and
international level, which was good for small businesses in
Talkeetna. He opined the industry is not looking for a handout
from the state, although state investment in the industry has
generated growth in the marketplace and in the state's economy.
He pointed out individual small businesses cannot access large
marketplaces. The proposed legislation would allow the industry
to work with a tax system involving businesses, guests, staff,
and personnel, in order to generate revenue for an effective and
consistent marketing program. Mr. Mahay restated support for
the bill and self-imposed taxes on the tourism industry.
12:12:31 PM
CHAIR LINCOLN asked for more information on Mr. Mahay's
business.
MR. MAHAY said his company operates a fleet of nine jet boats in
Talkeetna; his company hosts approximately 22,000 guests per
summer and employs 25 people.
REPRESENTATIVE NEUMAN asked Mr. Mahay for additional solutions
related to funding for the tourism industry.
MR. MAHAY said the language in the bill "is heading in the right
direction." He suggested tourist attractions could collect the
tax to forward to the state and thereby create a pool of money
for use by industry for marketing.
12:14:21 PM
BRETT CARLSON informed the committee he is a lifelong Alaskan
working in the travel industry. Mr. Carlson observed the travel
industry allows small businesses in rural Alaska to participate
in the travel industry at the ownership level. In addition to
operating a small hospitality center on the Dalton Highway, he
said he works with a family of tour companies - Northern Alaska
Tour Company, Wright Air Service, and Warbelow's Air - that are
doing business throughout Interior and Arctic Alaska. Part of
his business is renting vehicles to tourists traveling the
Dalton Highway, and thus his company pays VRT. Mr. Carlson
disagreed with others who have testified that in 2003, when VRT
legislation first passed, the tax was to support highways and
airports. Instead, he stressed the intent of the legislation
was to use the funds for destination marketing to the extent
allowed by the Alaska State Constitution; in fact, there was
"implicit commitment from the legislature that, [revenue for
VRT] would be used to market Alaska and grow Alaska's travel
resource." Further, he also disagreed with those who believe
"that the legislature hasn't followed through on that
commitment," and he provided additional history on the
legislation. Mr. Carlson concluded that only in the last two to
three years has funding been insufficient, and [HB 383] provides
an opportunity for the legislature to develop Alaska's travel
resource.
12:19:18 PM
KIRK HOESSLE, President, Alaska Wildland Adventures, informed
the committee Alaska Wildland Adventures operates three lodges
on the Kenai River and offers multiday adventure programs from
the Kenai River to Denali and beyond. The business began in
1977 and employs 12 year-round and over 100 seasonal employees.
He expressed his strong support for a destination marketing
program and HB 383; in fact, research throughout the U.S. has
shown that a strong and well-funded destination marketing
program is essential for a strong diversified travel tourism
economy that reaches into rural areas. Mr. Hoessle pointed out
his business benefitted from years of high levels of state
spending in support of tourism programs that culminated in 2015
and 2016; however, in 2017, a decline in trip inquiries and
revenue occurred. He expressed his belief the aforementioned
decline is the result of severely reduced marketing programs,
and he noted his concern for small businesses throughout the
state, especially those operating in rural and remote areas. He
restated his support for the tourism improvement district
concept within HB 383, which has been proven effective in other
jurisdictions.
REPRESENTATIVE TUCK has heard the amount of tourism dollars
coming into Alaska is at record levels and asked whether this is
not the situation for Mr. Hoessle's business since 2017.
MR. HOESSLE confirmed his business has had a decline; although
Alaska has record numbers of visitors, they are not distributed
equally throughout the state; however, marketing [rural areas]
is effective after visitors are convinced to come to Alaska.
REPRESENTATIVE TUCK asked how much Mr. Hoessle spends annually
on a marketing plan.
MR. HOESSLE said his business spends approximately 10 percent of
its sales revenue - over $300,000 to $400,000 - on marketing
initiatives through web site publications and promotions.
12:23:45 PM
DAVID STORY stated he is an employee of Alaska Wildland
Adventures. Speaking for himself and others in his community,
he said he supports a statewide tourism marketing program which
is essential to the success of small businesses - such as Alaska
Wildland Adventures - that make up the economic community of
Cooper Landing, the Kenai Peninsula, and businesses throughout
Alaska. Mr. Story cautioned small businesses cannot spend much
for marketing their services to broad audiences and thus depend
on the state to promote greater Alaska as a travel destination,
in addition to a cruise destination. The tourism improvement
district concept is attractive because it ensures participation
by all the tourism industry while allowing specific funding from
the industry. He urged the legislature to address
prioritization of general funds, but not at the expense of the
intended use of VRT or investment in tourism marketing. Mr.
Story concluded [HB 383] would attract more visitors and glean
additional money for the destination marketing program, and he
urged for urgency to support the economic backbone of Cooper
Landing. He described some of the provisions of the bill and
pointed out that jobs in rural Alaska are difficult to find;
programs similar to those in the bill can maintain a consistency
of employment to avoid a "boom and bust" cycle. Mr. Story
restated his support for HB 383.
CHAIR LINCOLN asked where Alaska Wildlife Adventures spends
$300,000 to $400,000 in marketing programs.
MR. STORY said the marketing budget is spent on online marketing
and direct consumer marketing.
12:28:36 PM
KELLY BENDER, Co-owner, Lazy Otter Charters, informed the
committee she and her husband own Lazy Otter Charters in
Whittier, which operates four boats in Prince William Sound, a
fleet of rental kayaks, and a coffee and gift shop, and employs
twenty Alaskans seasonally, and six part-time, year-round. She
noted responsible owners continually invest in their businesses
to be successful, and she and her husband invest in their
business, the industry, and the state. Lazy Otter Charters
operates year-round and works hard to participate in the local
economy by promoting their business, advertising, and actively
finding customers. Ms. Bender opined tourism is Alaska's
business, providing thousands of year-round jobs and supporting
many small businesses, and the legislature should support the
industry. In fact, Alaska is out-marketed by nearly every other
state in the nation; other states understand the importance of
promotion and the economic value of the tourism industry; to be
competitive, Alaska must have a strong tourism program. Lazy
Otter Charters supports industry's effort to establish a long-
range solution for sustainable tourism marketing, an assessment
to establish a tourism marketing fund, the tourism improvement
district model, and VRT revenue directed to the tourism
industry. She closed, noting visitors to Alaska do not
"magically appear" but come to the state due to years of a
diligent and aggressive marketing program; she urged that the
committee support HB 383.
12:32:26 PM
KAREN HARRIS, Owner, Alaska Garden Gate B&B and Cottages, stated
her strong support for HB 383 and agreed with previous testimony
provided by Steve Mahay, Brett Carlson, and Kirk Hoessle. As a
small business owner since 2002, she has grown her business to
employ three fulltime year-round positions and twelve part-time
seasonal positions. Her business did well during the period
that the state funded marketing, but business has fallen since
then. She opined the residual effects from years of $20 million
[tourism marketing] budgets have come to a close. As an
appointed board member of ATIA, she observed ATIA strongly
supports the needs of small businesses. Ms. Harris said
legislators and industry, by establishing a tourism improvement
district, seek to keep tourists coming to Alaska and to smaller
businesses in rural areas of Alaska.
12:35:14 PM
DEBORAH HANSON, Spokesperson, Pike's Waterfront Lodge (Pike's),
stated her support for establishing a tourism improvement
district (TID); as described by other testifiers, she said
Pike's was growing until last year and is struggling with sales
this year. One of her agents explained Alaska is competing with
Europe for tourism bookings, and some East Coast clients prefer
Europe. Further, the lack of television advertising and the
failure to send vacation planners have had negative impacts.
Ms. Hansen said Pike's advertising cannot entice an independent
land-traveler to travel to Fairbanks, thus [Pike's] relies on
the state to make "the State of Alaska look attractive out there
in the marketplace." She restated her support for the bill and
said she has been working for over one and one-half years to get
a TID implemented. Ms. Hansen urged the committee's support.
12:38:05 PM
JOHN LAMBETH, Industry Consultant, ATIA, returned attention to
the issue of VRT and explained tourism improvement districts in
the U.S. and internationally commonly use VRT as a part of that
mechanism. He said after lengthy discussion, Alaska's tourism
industry seeks a partnership with the state by its willingness
to accept a self-imposed tax. He acknowledged the state has
limited funds; however, HB 383 does not dedicate funds,
therefore, the legislature retains its power of appropriation.
Continuing with comments on the bill, Mr. Lambeth first
characterized the bill as a starting place. Second, in response
to testimony related to the procedure of elections, he assured
the committee the procedure makes sense and is internally
consistent; in fact, as enabling legislation, HB 383 is a
framework for industry, and the board created thereby would
satisfy all outstanding specific questions prior to the
election. Third, to the question of whether the ATIA board
would be involved, he pointed out the bill would create a
transition board and he outlined its functions. Fourth, in
recognition of Alaska's constitutional limitation against
dedicated funds, HB 383 allows industry to dissolve the
assessment if the legislature does not appropriate funds in
accordance with the intent of the bill. Finally, there are 167
TIDs in the U.S., some of which were established in less than
one year. Mr. Lambeth stressed HB 383 presents a proven
mechanism and urged the committee's support.
12:43:18 PM
MARK WEAKLAND, General Manager, Hotel Alyeska and spokesperson,
Alyeska Resort, expressed opposition to the bill, stating Hotel
Alyeska and Alyeska Resort view HB 383 as a very narrow targeted
year-round resort and statewide lodging tax. He explained that
the proposed legislation is narrow in that the tax would be paid
by businesses across the state on a year-round basis for the
benefit of primarily summer visitation proprietors but exclude
many principle payers within "the summer marketplace," such as
large cruise lines, airlines, and others. He surmised there may
be more exempted businesses than participatory businesses. On
the other hand, the bill creates a tax with specificity,
although other provisions of the legislation are vague. Mr.
Weakland stated Hotel Alyeska and Alyeska Resort pay $1 million
at a 12 percent rate to the Municipality of Anchorage, and
Anchorage "brought in" $25 million last year. This amount of
revenue indicates - even after a decline in commercial commerce
such as state government and corporate travel - the travel
industry "had a decent year as far as Anchorage ..." even
following smaller legislative appropriations [to the tourism
marketing budget]. Alyeska Resort operates year-round and
employs 650 workers, thus year-round sustainability is its
upmost interest; he pointed out there is a high cost to doing
business in Alaska year-round and cautioned against increasing
lodging taxes to businesses that are not on the Railbelt and
that do not have an airport [nearby]. Mr. Weakland noted that
each community has a destination marketing program; in
Anchorage, the cost is 12 percent, and some municipalities the
cost is less.
12:46:56 PM
DONALD BULLOCK stated he is a retired attorney speaking on his
own behalf. He expressed opposition to the bill because it is a
new tax placed on a targeted industry - the tourism industry -
which would be enforced by the state; however, unlike other
taxes, the bill puts the tourism industry in the position of
deciding whether the tax would be applied, and if so, DOR could
file levies against nonpayers for the assessment, penalties, and
interest. Turning to the topic of dedicated and designated
funds, he recalled the Alaska Supreme Court ruled assets in the
Alaska Permanent Fund are not dedicated, but are subject to
appropriation; similarly, the tax collected by HB 383 would go
into the general fund. Mr. Bullock advised that the best
intention [by the legislature] would be to appropriate the money
back to the tourism industry; however, he cautioned that the
money collected from the tax could be used for any public
purpose.
REPRESENTATIVE JOSEPHSON asked whether it is improper to
authorize DOR, which is an agency of the sovereign, to collect a
tax "that isn't really the sovereign's."
MR. BULLOCK said no. He explained HB 383 would collect a tax,
under a statute, that would go into the general fund in the same
manner as mining taxes and production taxes; the big difference
would be the taxpayers would decide whether to apply the tax.
12:51:09 PM
REPRESENTATIVE JOSEPHSON observed that other designated funds in
the budget could be repurposed, perhaps leading to protests and
disgruntlement [by Alaskans].
MR. BULLOCK recalled Alaskans were upset because the full amount
of [designated] permanent fund monies was not made available,
and that led to a lawsuit confirming that the funds are subject
to appropriation. For example, the proposed tourism fund may
pay for a [marine] dock or other infrastructure that is related
to tourism but is not marketing. He characterized designated
funds as "often disappointed funds," because they can be used
[by the legislature] for any public purpose.
REPRESENTATIVE JOSEPHSON suggested the tourism industry has
decided to trust legislators.
MR. BULLOCK agreed there is trust, albeit a trust with no
guarantee and a high risk.
REPRESENTATIVE EDGMON asked if Mr. Bullock's opposition to the
bill is founded on principle and whether there are alternative
mechanisms he would suggest.
MR. BULLOCK said the problem is that [HB 383} is an approach to
fund tourism that is subject to tax law and appropriation from
the general fund. A different example of how an industry raises
funds would be the collection of dues members pay to the Alaska
Bar Association or to service clubs for benefits such as
advertising; an alternative would be a private organization that
assesses its members, rather than imposing a state tax that is
subject to appropriation for other uses.
12:55:09 PM
REPRESENTATIVE EDGMON asked Mr. Bullock to clarify whether he is
testifying on his own behalf and the basis for his opposition.
He then restated the earlier question as to whether there are
alternative mechanisms to achieve the purpose of the bill.
MR. BULLOCK clarified his opinion is his own legal opinion; he
is not representing anyone, nor does he hold an adverse opinion
of the tourism industry. He said his legal advice to the
committee, based on his experience with tax law, is that [HB
383] is a new tax that does not result in a dedicated fund and
is subject to appropriation.
REPRESENTATIVE TUCK asked whether Mr. Bullock has concerns about
the bill because the tax is self-imposed.
MR. BULLOCK said no. He said the funding mechanism within HB
383 has been compared to funding for the Alaska Seafood
Marketing Institute (ASMI); however, ASMI funding is subject to
the Executive Budget Act, but "there's no mention of that in
this bill." In further response to Representative Tuck, he
explained the Executive Budget Act [AS 37.07.010] statement of
policy grants the legislature the opportunity to review budget
expenditures and decide how appropriations are made.
12:58:34 PM
REPRESENTATIVE TUCK restated his question pertaining to
[possible problems caused by] an organization self-assessing a
tax.
MR. BULLOCK explained that the legislation would authorize [the
tourist] organization to decide whether it is going to be taxed,
which he characterized as unique [legislation]. He directed
attention to fiscal note Identifier: DOR TAX HB383 version 1.
It indicates that HB 383 would require DOR to add three
positions, and implementation of the program would require a
capital expenditure of $900,000; he questioned whether the
legislature would choose to spend limited funds [to implement
and administer HB 383]. Returning to ASMI funding, he noted
ASMI marketing money is directly tied into [AS 43.75 Fisheries
Business License and Taxes and AS 43.77 Fishery Resource Landing
Tax], thus to the extent that ASMI marketing is successful,
there is a greater incentive for more fish processing and a
direct link to more taxes to the state; however, the link in HB
383 is indirect. He restated his opposition to the tax aspect
of the bill.
REPRESENTATIVE JOSEPHSON asked:
... because we're dissolving the existing board ...
even though it's not state revenue in a traditional
sense, ... it's still a tax, and there's no way for us
to monitor the nature of the expenditures for their
efficacy ...?
MR. BULLOCK advised the Executive Budget Act provides the
legislature a mechanism for monitoring state appropriations, as
does the Legislative Budget and Audit Committee.
REPRESENTATIVE JOSEPHSON opined the "trust element" is less of a
concern - when related to HB 383 - because the taxpayers could
choose to end self-imposition of the tax, if desired.
MR. BULLOCK said that's correct, "this is an industry that's
going to decide when it'll be taxed and when it ... will no
longer be taxed, [the bill is] unique."
1:02:24 PM
CHAIR LINCOLN closed public testimony on HB 383.
1:03:19 PM
HB 383 was held over.
1:03:57 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Arctic Policy, Economic Development, and
Tourism meeting was adjourned at 1:03 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB383 Additional Document - Letter of Opposition - Alyeska -- 3.5.18.pdf |
HAET 3/6/2018 11:30:00 AM |
HB 383 |
| HB383 Supporting Document - Analysis of Tourism Marketing Program Funding 2017 -- 3.5.18.pdf |
HAET 3/6/2018 11:30:00 AM |
HB 383 |
| HB383 Supporting Document - Economic Impact Report 2014-2015 -- 3.5.18.pdf |
HAET 3/6/2018 11:30:00 AM |
HB 383 |
| HB383 Supporting Document - FY19 LFD Budget Overview -- 3.5.18.pdf |
HAET 3/6/2018 11:30:00 AM |
HB 383 |
| HB383 Supporting Document - Letter of Support - Alaska Wildland Adventures -- 3.5.18.pdf |
HAET 3/6/2018 11:30:00 AM |
HB 383 |
| HB383 Supporting Document - Rep. Grenn to Alyeska Response Letter -- 3.5.18.pdf |
HAET 3/6/2018 11:30:00 AM |
HB 383 |
| HB383 Fiscal Note DNR-PKS-02-27-18.pdf |
HAET 3/6/2018 11:30:00 AM |
HB 383 |